Fighting fraud: When a watchdog needs a bloodhound

Article, Financial Director – July 2019

Companies must have a system in place to prevent and investigate fraud, says Alex Hodgson of BTVK Advisory.

A series of high-profile scandals and business failures at some of the best-known corporate names in the UK has thrown technical accounting issues into the spotlight. It has also re-ignited the debate about the role of external auditors in detecting fraud.

In 2017 Tesco agreed a Deferred Prosecution Agreement (DPA) and a £129m fine with the Serious Fraud Office for irregularities over supplier payment recognition. Meanwhile, the seeds of Carillion’s collapse were being sown as £1bn was written down from its contracts, based partly on the unique way in which revenue is recognised on large construction projects.

Subsequently, Patisserie Valerie entered administration in January 2019, a collapse caused principally by the discovery of a £94m hole in its accounts, allegedly concealed by overvalued assets, concealed liabilities, and a gaping £54m cash shortfall.